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Railroad Stocks Are Poised to Gain Market Share

As railroads increase their efficiency, they become more able to gain freight share from trucks

North America's Class I railroads have reported extraordinary increases in their efficiency, as evidenced by their operating ratios, the total proportion of revenue spent on expenses. Over the last two decades since deregulation, railroads have been eliminating underperforming lines, modernizing their systems, and generally making their operations more attractive. The more efficient railroads can be, the better able they are to compete in the intercity freight market.

As railroads continue to bring down costs, the rates they can offer customers look ever more efficient. At the same time, the rail industry's biggest competitor in intercity freight -- trucks -- will suffer. Trucking will contend with stricter and stricter environmental regulations that push costs up, requiring truckers to adopt expensive new systems to deal with carbon and particulate pollution. In the following video, Motley Fool contributor Daniel Ferry assesses the incredible successes the rail industry has achieved and the opportunities it faces.

Author

Daniel Ferry is a logistics nerd with a transportation planning background who focuses on transportation and advanced manufacturing companies. When he's not writing about trains, planes, and such, he enjoys learning and thinking about the business behind his favorite things: music, media, and good food and drink.